Sale-leasebacks: A Flexible Capital Solution Across the M&A Lifecycle
How private equity firms leverage sale-leasebacks both pre- and post-acquisition
As private equity firms continue to navigate a dynamic M&A environment, access to capital is critical. One increasingly important tool in their toolkit is the sale-leaseback.
By unlocking capital embedded in real estate, sale-leasebacks can support transactions at multiple stages of the deal lifecycle – from acquisition financing to post-close optimization.
Below, we explore how private equity sponsors are leveraging sale-leasebacks both at the point of acquisition and after closing, with a recent transaction serving as a practical example.
Strengthening the Capital Stack at Acquisition
In competitive M&A processes, particularly in corporate carveouts or complex platform acquisitions, certainty of financing and speed of execution are critical differentiators. Sale-leasebacks can play a key role at this stage by serving as a complementary capital source within the transaction structure.
Rather than relying solely on traditional debt or equity, private equity firms can incorporate a sale-leaseback to monetize a target company’s owned real estate as part of the acquisition financing. Because land and buildings tend to sell at higher valuations than the company itself, private equity firms can sell portfolio company real estate and rent it back under a long-term lease, thereby capturing a multiple arbitrage and blending up their initial purchase price multiple without necessarily contributing more equity themselves.
Using a sale-leaseback at closing serves a number of benefits, including:
- Providing immediate funds to aid in maximizing purchase price to a Seller (and winning an auction)
- Reducing the required equity investment
- Lowering overall cost of funds or increasing overall financing duration from traditional financing sources
In this way, sale-leasebacks serve not just as a financing tool, but as a competitive edge in winning and efficiently executing complex M&A transactions.
Unlocking Value Post-Acquisition
While executing a sale-leaseback at closing may often be optimal, for a number of reasons acquirors may prefer to wait until post-closing to pursue a sale-leaseback. Post-acquisition capital can be a way to fund additional acquisitions, repay expensive debt, or invest in incremental equipment or higher ROI opportunities.
Once a private equity firm has acquired a business, monetizing owned real estate through a sale-leaseback allows the sponsor to:
- Recapture a portion of its initial equity investment
- Reallocate capital toward portfolio company growth initiatives, add-on acquisitions or operational improvements
- Replace shorter-term debt with long-duration leases with no refinancing risk
Post-closing sale-leasebacks offer a number of advantages in optimizing a business where additional capital could be put to better use. Private equity firms can often benefit from evaluating their real estate portfolios to find untapped sources of capital to reinvest in their businesses.
Case Study: GardenCore
In May 2026, W. P. Carey completed the $400 million sale-leaseback of a 43-property manufacturing portfolio leased to GardenCore, a leading U.S. manufacturer of lawn and garden consumables. The deal was completed in conjunction with a private equity firm’s acquisition of the business as part of a corporate carveout.
By incorporating the sale-leaseback into the capital stack, the sponsor was able to unlock value and reduce the acquisition purchase price, illustrating how sale-leasebacks can help facilitate complex M&A deals.
A Strategic Lever for Private Equity
As M&A activity continues to evolve, sale-leasebacks are increasingly becoming a core component of how private equity sponsors structure and optimize their acquisitions, transforming real estate from a passive asset into a strategic source of capital.
With over $6 billion in private equity financing completed since 1973, W. P. Carey remains well positioned to support private equity firms in unlocking significant capital through sale-leasebacks. Get in touch today!
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Private Equity and Sale-leasebacks: Choosing the Perfect Partner
Private equity-backed deal volume has hit its lowest point in four years. Unsurprisingly, the biggest factor contributing to this decline is the high cost of debt due to rising interest rates, which has made private equity deals more expensive. As a result of the challenging capital environment, PE firms are turning to sale-leasebacks as part of their financing strategy. In a sale-leaseback, private equity firms can sell their portfolio company real estate to an investor for cash while the company simultaneously enters into a long-term lease. In doing so, the PE firm extracts 100% of the real estate’s value and converts an otherwise illiquid asset into working capital. This is particularly beneficial now, as cap rates on sale-leasebacks have risen significantly less than other forms of debt, making them an attractive funding alternative on a relative cost of capital basis. For PE firms evaluating a sale-leaseback, there are several factors to consider when choosing a partner to ensure the deal gets done quickly, efficiently and meets the needs of all parties. Here are three that are critical in today’s environment: Experience One of the most important qualities to look for in a sale-leaseback partner is experience. Ensuring the investor has a strong history of successfully closing transactions, including private equity-backed transactions, will ensure the process is smooth and well executed. In addition, if the deal involves multiple properties, countries or lease structures it’s important to look for a global investor with the ability to execute on complex, cross-border and multijurisdictional transactions. There are a number of new entrants in the sale-leaseback space, so working with an investor with several decades of experience may help maximize proceeds and make the process easier, particularly for PE firms exploring sale-leasebacks for the first time. Access to capital Another critical quality in a sale-leaseback partner – made more important in today’s environment – is access to capital. All-equity buyers, which are typically publicly traded REITs that access the public equity and debt markets, are better positioned to close on deals given they aren’t reliant on securing third-party debt financing at the time of close. This means they are less likely to re-trade and can offer better certainty of close when it comes to execution. Ability to meet timing constraints Many private equity firms considering sale-leasebacks are looking to do it in conjunction with a portfolio-company acquisition, leveraging the financing as part of the capital stack. This means that finding a sale-leaseback partner that can meet timing constraints is important, given the capital is needed to complete the corporate acquisition. Experienced and well-capitalized investors can typically provide a quicker and more efficient close, and some even have the ability to close in less than 30 days if required. For an example of how PE firms can use sale-leasebacks to help fund an acquisition, read about W. P. Carey’s recent deal with SK Capital and Apotex. Closing thoughts By finding a partner with these characteristics, private equity firms can successfully leverage a sale-leaseback to help capitalize on M&A opportunities and unlock value in portfolio-company real estate assets. W. P. Carey has 50 years of experience and has successfully closed nearly $6 billion in PE-backed deal volume. Contact us today if you’d like to evaluate a sale-leaseback as part of your financing strategy!
How Private Equity Can Leverage Sale-leasebacks
Sale-leasebacks are often used by private equity firms to raise capital to support portfolio company growth. Through a sale-leaseback, private equity firms can unlock otherwise illiquid capital tied up in portfolio company real estate and reinvest the proceeds into its core business. Here’s how private equity firms can leverage sale-leasebacks to generate long-term value: Maximize portfolio company value by reinvesting sale-leaseback capital into its operations Following the completion of a sale-leaseback, private equity firms can immediately invest the proceeds into its portfolio company’s business operations to support long-term growth. These include investments in new facilities, technology, equipment, R&D and human capital. The benefit of pursuing a sale-leaseback instead of other debt alternatives is that PE firms can realize 100% fair market value for the portfolio company real estate. For example, W. P. Carey worked with a middle-market private equity firm on the $19 million sale-leaseback of two industrial facilities leased to a global distributor of plastics. The private equity firm used the transaction proceeds to secure long-term capital to expand portfolio company operations and fund future growth initiatives. Pay down existing debt and provide portfolio companies with balance sheet flexibility Private equity firms can use sale-leasebacks as a method to recapitalize and strengthen the credit metrics of their portfolio companies. Particularly for smaller, non-credit-rated companies that cannot access the capital markets, a sale-leaseback is a great tool to provide balance sheet flexibility and enable portfolio companies to pay down maturing debt and other liabilities. By improving the balance sheet, private equity firms can position a portfolio company for a credit upgrade or even an IPO, maximizing the long-term value of the company. In 2020, W. P. Carey provided a private equity firm $40 million in sale-leaseback financing for a manufacturing facility leased to a global leader in barbecue grills and accessories. Proceeds were used to pay down debt and improve the balance sheet, helping position the company for a positive credit improvement. Shortly after the sale-leaseback, the company completed an IPO raising over $250 million. Compete more effectively for new acquisitions and M&A Sale-leasebacks can be used by private equity firms to help finance add-on acquisitions – where a PE firm acquires a new company and mergers it with an existing portfolio company to generate growth. By carving out real estate from a business during or post-acquisition, private equity firms can unlock substantially higher value for the real estate due to the spread between the lower cash flow multiple paid to acquire the business and the much higher cash flow multiple received from the sale of the real estate itself. As a result, sale-leasebacks are a capital-efficient way to maximize portfolio company growth while also serving as a positive arbitrage opportunity for private equity firms. W. P. Carey worked with a private equity firm on the $29 million sale-leaseback of four industrial facilities leased to a global manufacturer and distributor of vehicle-mounted aerial lifts. Proceeds from the transaction were used to partially fund the manufacturer’s acquisition of a German company in the same industry, enabling them to expand their market share in Europe. Conclusion Sale-leasebacks are a highly attractive capital allocation tool with many strategic and financial benefits for sponsored companies. Real estate financing can be an extremely effective way to fund growth and add value to portfolio companies, particularly in today's high-interest rate environment. In order to maximize proceeds, PE firms considering a portfolio company sale-leaseback should work with an all-equity buyer with experience working with all types of credits. W. P. Carey has partnered with private equity firms and their advisors on these types of transactions since 1973, and has provided over $5.7 billion in capital to PE firms and their portfolio companies. If you’re interested in pursuing a portfolio company sale-leaseback, please contact us at globalinvestments@wpcarey.com.
Sale-leasebacks Have Become a Critical Tool for PE Firms. Here’s Why.
Growing PE Fund Sizes 2019 first quarter middle market private equity deal activity slowed compared to 2018, with declines in public markets and the government shutdown creating adverse pricing for PE backed IPO exits. Despite decreased deal volume and exit values, fundraising figures remained steady in the quarter, boosting dry powder available for new investments. Strong investor demand led PE firms and sponsors to grow the scale of their funds, with vehicles between $1 billion and $5 billion accounting for over three-quarters of capital raised. In fact, the average PE fund in 2019 has raised 70% more compared to the whole of 2018, demonstrating the substantial increase in fund size, based on data compiled by Pitchbook. Elevated Deal Multiples Multiples on new deals have remained elevated, fueled by the swelling dry powder base. The challenge for PE fund managers is to be competitive on securing new investments while meeting investor return expectations. Consequently, dividend recaps and add-ons have become more common as GPs endeavor to boost returns in the current elevated pricing environment. Increased Deal Sizes and Longer Holding Periods Along with larger funds, deals have grown in size and complexity, and longer holding times for investments are becoming more prevalent. Traditionally PE portfolio companies have been held for three to five years before being exited. Fewer than 50% of middle market exits occur in under five years, with the median holding time currently at 6.8 years. The top 25% of exits are hovering around a decade. As a result, there are increasing numbers of long-dated funds with investment periods extending to 15 years or more. Sale-leasebacks: An Innovative Capital Source to Mitigate Risk and Increase IRR To mitigate the risk of larger deal sizes, higher multiples, longer holding periods and uncertainty around longer-term interest rates, many GPs are turning to sale-leasebacks as a critical component of the capital stack. Because land and buildings tend to sell at higher valuations than the company itself, PE firms can sell a portfolio company real estate asset and rent it back under a long-term lease, thereby capturing a multiple arbitrage and blending down the initial purchase price multiple. Post-acquisition, a sale-leaseback can create liquidity, allowing an earlier return of cash to investors, thereby boosting IRRs. Conclusion In the current environment a sale-leaseback can effectively decrease acquisition multiples and allow PE firms to be more competitive in bidding for new acquisitions. A well-structured sale-leaseback with an experienced capital partner like W. P. Carey provides PE firm portfolio companies with access to an efficient, alternative and flexible source of long-term capital. In addition to helping PE firms achieve targeted investor returns, W. P. Carey works with its tenants on an ongoing basis to support their longer-term operating objectives through follow-on projects including expansions, building upgrades and build-to-suit funding for new facilities. W. P. Carey’s net lease portfolio comprises diverse property types and a range of asset classes in 31 industries and 25 countries, enabling us to work with a wide range of companies.